DIS Shares Fall 3.9% in Pre-market as Disney Reports Mixed Q2 2021 Earnings Missing Subscriber Expectations

UTC by Bhushan Akolkar · 3 min read
DIS Shares Fall 3.9% in Pre-market as Disney Reports Mixed Q2 2021 Earnings Missing Subscriber Expectations
Photo: Depositphotos

While Disney’s subscriber base for its streaming services continues to surge further it is still not in line with Wall Street expectations. Disney targets a 240-260 million subscriber base by 2024.

In the aftermarket hours on Thursday, May 13, and in the pre-marker today, shares of The Walt Disney Company (NYSE: DIS) are down 3.9% after the company reported mixed earnings for Q2 2021. The company reported lower-than-expected revenue while missing on the subscriber expectations for its streaming service. Walt Disney reported a $15.61 billion revenue against the estimated $15.87 billion.

Also, the company’s streaming business continued to move ahead. The Disney+ subscriber base stood at 103.9 million up from 100 million in the March quarter. However, it was still less than Wall Street’s expectations of 109 million.

While Disney’s core business of theme park is under pressure amid Covid restrictions, the streaming business is offering some hope. But the growth of the streaming business seems to be slowing down faster than expected. The average monthly revenue per user stood at $3.99 down 29% year-over-year. Disney said that this drag down was due to the launch of Disney + Hotstart in the Indian market.

This service has a relatively lower average monthly revenue per subscriber in comparison to the Disney + services in other markets. Excluding Hostar, the company’s average revenue per subscriber stood at $5.61, said Disney CFO Christine McCarthy.

However, Disney CEO Bob Chapek said that he’s confident of the company’s growth going ahead. Besides, the target of having a 240 million to 260 million subscriber base of Disney+ by 2024 remains intact. Chapek also said that he is “extremely pleased” with the subscriber’s reaction to the price increase of monthly subscriptions from $6.99 to $7.99. He added:

“This quarter’s numbers were exactly as we projected internally, so no disappointment here. We have not seen a significant churn rate. We seem to be resilient to price increase and makes us feel bullish going forward.”

As of the end of the second quarter, Disney has 159 million total subscribers.

Disney Parks Business Takes a Hit Amid Covid which Affects Q2 Earnings

Disney registered a 44% drop in the revenue for its parks, experiences and products segment. The revenue stood at $3.2 billion. This drop comes as its theme parks have been operating at reduced capacities or closed due to Covid restrictions. The Parks division has witnessed $1.2 billion in losses in operating income during the last quarter.

Besides, Disney also recorded a $414 million one-time charge for impairments and severance for the closure of the Disney-branded retail stores and an animation studio. The company also paid severance to workers and resort businesses.

On April 30, Disney reopened its California-based parks. Thus, the revenue garnered in the last few weeks hasn’t come into the second-quarter results. McCarthy is hopeful on the ramp-up of the vaccine drive will likely bring cases under control. This will ultimately be beneficial for Disney and other businesses.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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